The Competitive, Technological, Political, and Social-Cultural

Document Sample
The Competitive, Technological, Political, and Social-Cultural Powered By Docstoc
					The Competitive,
Technological, Political,
and Social-Cultural
          Learning outcomes
 By studying this section students will be able to:
      describe and analyse an organization’s competitive
      describe and analyse an organization’s
       technological environment
      describe and analyse an organization’s political
      describe and analyse an organization’s
       sociocultural environment
       The external environment

 The main factor that affects most business is the
  degree of competition – how fiercely other
  businesses compete with the products that another
  business makes.
      The other factors that can affect the business are:
      Social – how consumers, households and communities
       behave and their beliefs. For instance, changes in
       attitude towards health, or a greater number of
       pensioners in a population.
      Economic – how the economy affects a business in
       terms of taxation, government spending, general
       demand, interest rates, exchange rates and global
       economic factors.
The external environment
 Political – how changes in government policy
  might affect the business e.g. a decision to
  subsidise building new houses for the poor in
  several areas could be good for construction
 Technological – how the rapid pace of change
  in production processes and product innovation
  affect a business.
 Ethical – what is regarded as morally right or
  wrong for a business to do. For instance should
  it trade with countries which have a poor record
  on human rights.
The competitive environment

 In his book Competitive Strategy (1980),
  Porter proposes the following model (‘the
  five forces’) for investigating the
  competitive environment:
     1 the threat of entrants
     2 the power of suppliers
     3 the power of consumers
     4 the threat of substitutes
     5 competitive rivalry
               Forces Driving Industry Competition

                                                 Threat of new entrants

Bargaining power                                                          Bargaining power
  of suppliers                                                                of buyers
                                Industry Competitors

 Suppliers                                                                     Buyers

                                     Rivalry Among
                                     Existing Firms
                   Threat of substitute
                   products or services

Issues in Defining an Industry

 What part of the industry corresponds to our firm’s
   What are the key ingredients of success in that part of
    the industry?
   Does our firm have the skills needed to compete in that
    part of the industry?
   Will the skills enable us to seize emerging opportunities
    and deal with future threats?
   Is our definition of the industry flexible enough to allow
    necessary adjustments to our business concept as the
    industry grows?
             Variables in Identifying Competitors

 How do other firms define the scope of their
   •   The more similar the definitions of firms, the more likely the
       firms will view each other as competitors
 How similar are the benefits the customers derive
  from the products and services other firms offer?
   •   The more similar the benefits, the higher the level of
       substitutability between them
 How committed are other firms to the industry?
   • To size up commitment of potential competitors to industry,
     reliable intelligence data are needed concerning potential
     resource commitments
Common Mistakes in Identifying

  Overemphasizing current and known
   competitors while ignoring potential entrants
  Overemphasizing large competitors while
   ignoring small ones
  Overlooking potential international competitors
  Assuming competitors will continue to behave
   in same way
Common Mistakes in Identifying
Competitors (contd.)

 Overemphasizing competitors’ financial resources,
  market position, and strategies while ignoring their
  intangible assets
 Assuming all firms in industry are subject to same
  constraints or are open to same opportunities
 Believing purpose of strategy is to outsmart
  competition, rather than satisfy customer needs
The technological environment

 Technological change offers two key
  opportunities for leisure and tourism
     First it can lead to cost reductions Second,
      technology can provide new products and
 However, technological change also
  poses threats where existing products
  become obsolete in the face of new
Effect of technology on LRAC
The technological environment

             What are the
              opportunities and threats
              in the technological
              environment for airlines?
  The political environment

The political environment includes all laws,
government agencies, and lobbying groups
that influence or restrict individuals or
organizations in the society.
            The sociocultural environment

 Sociocultural factors include the make-up of society, for
  example in terms of its
      population structure
      levels of education
      social class
           In societies where classes exist, one's class is determined
            largely by:
                   * personal or household per capita income or wealth / net
                  worth, including the ownership of land, property, means of
                  production, etc.
                   * occupation
                   * family background

      Attitudes of customers towards products and services
The End

Shared By: